Page 97 - MA-12

Retirement and Death of a Partner 4.27

Master Questions and Advanced Level Questions

Illustration 16.
The Balance Sheet of Hari, Sonu and Zubin who were sharing profits in the ratio of 5 : 3 : 2
as at 31st March, 2019 is as below:
Liabilities ` Assets `
Creditors 50,000 Cash at Bank 40,000
Employees’ Provident Fund 10,000 Sundry Debtors 1,00,000
Profit and Loss A/c 85,000 Stock 80,000
Workmen Compensation Reserve 10,000 Fixed Assets (Tangible) 60,000
Capital A/cs: Goodwill 5,000
Hari 40,000 Advertisement Suspense A/c 5,000
Sonu 62,000
Zubin 33,000 1,35,000
2,90,000 2,90,000

Hari retired on 31st March, 2019 and Sonu and Zubin decided to share profits in future in
the ratio of 2 : 3 respectively.
The other terms on retirement were as follows:
(i) Goodwill of the firm is to be valued at ` 80,000.
(ii) Fixed Assets (Tangible) are to be depreciated to ` 57,500.
(iii) Make a Provision for Doubtful Debts at 5% on Debtors.
(iv) A liability for claim, included in Creditors for ` 10,000, is settled at ` 8,000.
The amount to be paid to Hari by Sonu and Zubin in such a way that their capitals are
proportionate to their profit-sharing ratio and leave a balance of ` 15,000 in the Bank Account.
Prepare Revaluation Account and Partners’ Capital Accounts.
Solution:
Dr. REVALUATION ACCOUNT Cr.
Particulars ` Particulars `

To Fixed Assets A/c 2,500 By Creditors A/c 2,000
To Provision for Doubtful Debts A/c 5,000 By Loss on Revaluation transferred to:
Hari’s Capital A/c 2,750
Sonu’s Capital A/c 1,650
Zubin’s Capital A/c 1,100 5,500
7,500 7,500
Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Hari (`) Sonu (`) Zubin (`) Particulars Hari (`) Sonu (`) Zubin (`)
To Revaluation A/c (Loss) 2,750 1,650 1,100 By Balance b/d 40,000 62,000 33,000
To Hari’s Capital A/c ... 8,000 32,000 By Workmen Compen-
To Goodwill A/c 2,500 1,500 1,000 sation Reserve A/c 5,000 3,000 2,000
To Advertisement By Sonu’s Capital A/c 8,000 ... ...
Suspense A/c 2,500 1,500 1,000 By Zubin’s Capital A/c 32,000 ... ...
To Bank A/c 1,19,750 ... ... By Profit and Loss A/c 42,500 25,500 17,000
To Balance c/d (WN 3) ... 79,000 1,18,500 By Bank A/c ... 1,150 1,01,600
(Balancing Figure)
1,27,500 91,650 1,53,600 1,27,500 91,650 1,53,600